Where's Xbox heading, post-Impossible (Game Pass) Dream?
A look back and forward. Also: lots of platform news.
[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]
Totally terrific, it’s time to tromp around the latest Steam NextFest, which has a whopping 3,400 demos (up ~50% year on year) to enjoy. We’re already spotting some delightful highlights, and will have a bunch more to say on it next Tuesday.
Before we start, love that Resident Evil Requiem partnered with a shopping channel to sell a game/pull-up bar bundle in Japan, complete with tongue in cheek infomercial & hilarious 30-second promo. As IGN notes, the “‘Dream Hanging Health Device’ is meant ‘to release tension after fighting off zombies and getting perplexed by puzzles’.”
[FREE DEMO OF GDCo PRO? You too can get a free demo of our GameDiscoverCo Pro company-wide ‘Steam deep dive’ & console data by contacting us today - ~90 orgs have it. Or, signing up to GDCo Plus gets the rest of this newsletter and Discord access, plus more.]
Game discovery news: Death, Windrose & Gnomes
Let’s start out with a look at the latest game platform & discovery news, filtered through our rose-tinted glasses:
The latest unreleased trending Steam games in GameDiscoverCo Pro’s 7-day wishlist charts (Feb 17th-24th) see multiple Next Fest demos trending, inc. 'age of piracy' adventure Windrose (formerly called Crosswind) at #2, as well as 'friendslop' standout Burglin' Gnomes at #3. (Death Stranding 2’s #1 again, tho.)
Other early Next Fest-adjacent demo standouts include fun/gory co-op FPS John Carpenter’s Toxic Commando (#7) and ‘you live in the air’ survival crafter Guardians Of The Wild Sky (#10). Oh, and much-awaited roguelike deckbuilder sequel Slay The Spire 2 (#5) surges, ahead of an early March release.
Game Economist’s Phillip Black makes a good point here re: game biz trending: “Seriously, is no one ever going to adjust for inflation? Both Supercell's claim in Ilkka Paananen's letter… and Matthew Ball's The State of Video Gaming in 2026 report completely change when we adjust for conservative global inflation estimates.”
Final Fantasy VII Remake director Naoki Hamaguchi has been talking about why they had to use a key-card for the Switch 2 physical version: “If you compare loading directly from a game cartridge (containing all game data) to loading from the Nintendo Switch 2’s internal storage, the load speed difference is roughly double.”
Is Steam’s ‘notify wishlisted players’ email notification speed slower than it used to be? We’ve had a couple of dev reports of this, and we wonder if launch emails could be prioritized, speed-wise for algo reasons. (Maybe email is also becoming less effective & more people notice launches via the mobile app, etc? YMMV.)
We linked one of their organic Instagram videos in a recent newsletter, but Jestr.gg also has an interesting ‘incented’ shortform video business where creators get paid out for creating viral game promos for you. (Not an endorsement: we just thought it was an intriguing shortform-first biz model.)
Geopolitical tensions alert: a Genshin Impact expansion apparently inspired by Japan just got delayed & content shifted: “Players (and leakers) have argued that it’s a way to lessen the Japanese influence in the game during a time where political conflict between China and Japan have grown increasingly tense [re:] Taiwan.”
Meta things: the company’s Samantha Ryan sums up the state of Meta’s VR & metaverse push - basically ‘you go for it on VR, third-parties, cos we’re “going all-in on mobile” with Horizon Worlds’; meanwhile, the Game Pass-like Horizon+ subscription service has reached 1 million active users.
Talking of ‘price go up’, Circana’s Mat Piscatella pulled U.S. average sales prices over the latest 10 years for game-related items: “The average price paid per unit of hardware increased by 87% over that period, accessories jumped 121%, and software only 4% (which surprised me tbh).”
Steam hype-y things: a game got 18k wishlists in 6 days after its YouTube shorts went viral - tho we wonder if there’s a gulf between ‘see trippy video’ & ‘want to play trippy game’; Chris Z suggests that launching games during quarterly sales is (counter-intuitively) good because it improves your New & Trending duration..
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Xbox: where it goes, post-Impossible (GP) Dream?
So yes, that big Xbox exec reshuffle happened. This Week In Videogames has a good round-up, if you missed it: “Phil Spencer, Microsoft Gaming CEO, will retire after 12 years of leading the division. Sarah Bond, Xbox President, will resign. Asha Sharma, previously the president of Microsoft’s CoreAI organisation, will take over as CEO. Matt Booty, head of Xbox Game Studios, will be promoted to Chief Content Officer.”
There’s been a multitude of analysis on this, including some good insider info from Tom Warren at The Verge, who indicates Xbox had to rush the announce because IGN was planning to run a story on it. He also discusses the incipient failure (under Spencer and Bond) to land the ‘Xbox is everywhere’ story with the public.
So, other than awarding Polygon the ‘silliest take’ award for interviewing Microsoft AI helper Clippy about the changes - “It looks like you’re confused about Xbox! Would you like help?” - what can GameDiscoverCo add to the cacophony?
Well, we’re linking Andy Williams’ smooth AF version of the song ‘The Impossible Dream’ (above) for a reason. As the lyrics say: “To dream the impossible dream.. To fight the unbeatable foe… This is my quest, to follow that star… No matter how hopeless, no matter how far.” And we think we’ve identified Xbox’s impossible Game Pass dream:
A dynamic 100+ million subscriber Game Pass with engaged players: Netflix has grown from 25m subs in 2012 to 325m in 2025, and is a worldwide phenom. Why couldn’t Xbox Game Pass do the same thing for games, at even a third of those numbers?
Every new release from an owned studio moved the needle: let’s not forget that most of Xbox’s dev studio acquisitions were originally done in a boom time when there were worries about platforms getting locked out of content. For TV/movie streamers, you can track subs/unsubs to popular shows. Each win compounds.
Multi-platform success made Game Pass a truly ‘play everywhere’ win: there’s no question there’s room for playing games on platforms besides the good ol’ console. And with PlayStation winning the hardware market share war, why not change the playbook and get hefty PC, mobile & cloud sub revenue to add a moat?
And look - if you go back a fair few years, this all makes a lot of sense! Perhaps it could have worked, starting with just two things - ‘a dream, and six mbillion pounds’. But it didn’t, and we’re going to use three graphs - one per paragraph - to enumerate just why not. Let’s start with the idea of scaling to 100m GP subscribers:
The above graph is from ‘enpleinjour’ from the Install Base Forums, who made this graph & some commentary in 2024, when we discussed it. Allegedly, internal Game Pass leadership goals were subscriber accelerations to 35m in FY22 and 50m by FY24. And this just hasn’t happened - tho public data’s thin on the ground, as growth slowed.
We’ve talked about the ‘sleight of hand’ issue with Xbox Live Gold & Game Pass before -the fact that the cheaper Gold subscription (where many Game Pass subscribers were upgraded from) wasn’t included in sub numbers until v.late in GP’s growth cycle.
At the time, we framed this very much as ‘you’re playing the public’ on real growth numbers. But now we’re starting to feel it might also be a ‘you played yourself’ moment. The graph of ‘anyone paying a >$0 subscription to Xbox’ would look WAY flatter, and it would make no sense internally to forecast such aggressive growth. Numbers, huh?
Secondly, how about the concept that games from owned studios would constantly move the needle? Well, August 2025 Game Pass sign-up data from Antenna (above), via Joost van Dreunen’s analysis, does show subscription spikes for a handful of key first-party games. (And also third-party ones, including STALKER 2 & Expedition 33.)
There’s a general tailing-off (based on an index value in August 2024), even before the Oct. 2025 Game Pass changes which put Game Pass Ultimate up from $19.99 per month to $29.99 per month and no doubt increased churn in a major way.
Actually, having good quality first-party studios reliably deliver Game Pass bangers makes sense in a scaled model. With third-party content ever-more inexpensive to license, and Xbox’s hands-off approach to acquisitions (as discussed by Nathan Brown) leading to sluggish release schedules, the whole model’s efficacy is in question.
Finally, there’s the off-Xbox hardware scaling of Game Pass, the thorniest problem of the three. FTC’s Microsoft lawsuit revealed a bunch of internal Xbox planning around this, with a 2020 presentation (above) showing three expansion horizons:
“Horizon 1 (FY20): Console; Horizon 2 (FY21-23): Windows 10 (download & stream) + Mobile (companion & initial xCloud); Horizon 3+ (FY23+): Ubiquitous global access across devices.”
Well, it’s true that Microsoft got there, with a full Windows implementation, and - while unfortunately stymied by iOS and Android rules around ‘wrapper’ apps to play multiple games - at least SOME kind of Game Pass web app cloud streaming to mobile. (Epic’s lawsuits have sort of helped untangle this, kinda.)
The issue is the size of the prize. This graph has console-first usage as only 25% of the core Game Pass subscriber base at the end of Horizon 3, which we’re a couple of years past - meaning 75% off-console. But we’d be surprised if PC/mobile and off-console cloud usage is really >15-20% of total hourly Game Pass usage today*.
Why? Players on these platforms have lots of inexpensive ways to play games, both F2P titles and paid games on sale, and are more excited about owning large catalogs of titles than being tied in to a ‘play until you unsubscribe’ model. That’s just how it is.
(*Unfortunately, there’s no way to verify the 15-20% - it’s the impression we get. PC growth %s is up from a low number, and cloud usage got a decent boost, partly via the growth hack of adding free Fortnite on cloud. We think most of cloud is on-console UI ‘trying’ of games.)
What’s next for Xbox strategy, post-GP hangover?
So that’s Xbox’s strategy before the Activision Blizzard acquisition, an opportunistic (if huge!) pickup that turned into an unexpectedly protracted antitrust fight, as the markets started to downvalue game companies in the post-COVID comedown.
By the time that Jan. 2022 ATVI deal closed in Oct. 2023 (!), we’re pretty sure that it was clear internally that Game Pass growth was going sideways. Of course, Activision has a lot of standalone business parts, including mobile hits from King like Candy Crush. So it’s easy to say ‘this isn’t just about Game Pass’.
But with Game Pass not moving the needle outside of an Xbox console platform that’s on the decline, we’re really moving into the era of Xbox as a ‘generalized selling neat video games on multiple platforms company’ - albeit also with a multi-billion dollar Game Pass subscription business which isn’t dead, and will mainly grow on yield.
So the question comes up: how does this Xbox business - sans the breakout Netflix-like game sub success, with new Xbox hardware costs getting rocketed upwards by AI-related chip shortages - appeal to Microsoft on its current trajectory?
And look, we don’t think it does, much. Microsoft wants systems or SaaS-first, repeatable revenue, not hit-driven A&R-led businesses in a messy market. And Xbox’s trek to “fight the unbeatable foe… reach the unreachable star” on the repeatable subscription side is over.
Still, new Xbox management says they’ll “recommit to our core Xbox fans and players.” They have $ cover to do so - Microsoft’s other financials are stellar right now, with $38.5b in quarterly profit for FY26 Q2. Yet I think there will be a lot of analysis and recalibration behind the scenes. There’s plenty of great people, games & franchises in the portfolio. But there’s got to be a recalibration of intent & message.
As for the long-term - we would think an Xbox spinoff (to private hands?) was likely if MSFT had stopped at the Bethesda acquisition. The size of the ATVI deal makes the price of such a deal near-prohibitive, though, so we’re not quite so sure. In the meantime, it’s business as usual. Until it isn’t. Toodles…
[We’re GameDiscoverCo, an analysis firm based around one simple issue: how do players find, buy and enjoy your PC or console game? We run the newsletter you’re reading, and provide real-time data services for publishers, funds, and other smart game industry folks.]